Company Report | Q4FY11 Result Update

LONG TERM INVESTMENT CALL

2 June 2011 BUY

Industry Oil & Natural Gas Corp Ltd. (ONGC) Q4FY11 results are below our
CMP (INR) 282 estimates. This is due to the higher subsidy burden during the
Target (INR) 360 quarter.
Upside / Downside (%) 28
52 week High/Low (INR) 368/261 During the quarter Q4FY11, ONGC’s net sales has marginally
Market Cap (INR Mn) 47929 increased (4.6% YoY) to INR 153,962 mn while on an annual basis
3M Avg. Volumes (000’s) 4747 the same has increased by 9.8% to INR 658,418 mn FY11. The
P/E (FY12e) 9
increase in revenue was due to the higher crude price realisation.
Moreover, volume growth was marginally lower by 3.3% QoQ on
Shareholding Pattern (%)
Q4FY11.

EBITDA for the quarter Q4FY11 stood at INR 79723 mn decline of

15.4% YoY, while on annual basis the EBITDA has increased by 9.4%
in FY11 to INR 410,189 mn. EBITDA margin for the quarter Q4FY11
has contracted by 936 bps while on an annual basis it has declined
by 119 bps. Decline in the EBITDA for Q4FY11 was attributed to
Stock Performance higher operating cost. Operating cost during the quarter has
increased 23.6% led by higher operating & manufacturing cost
(increased 30% YoY) and increased employee cost( increased 60%
YoY).

PAT for the quarter Q4FY11 has declined 26.1% YoY to INR 27,909
mn while for FY11 PAT has increased by 12.9% YoY to INR 189,240
mn. PAT margin for Q4FY11 has contracted 621 bps YoY to 16.7%
while it has marginally increased (26 bps) in FY11 to 26.4%.
Degrowth in PAT for the quarter was due to the higher subsidy
burden with higher operating cost.
Performance (%)
1 Month 3 Months 1 Year
Outlook & Valuation
ONGC -7.2 4.7 -1.7
NIFTY -1.9 1 12.5
ONGC expects to increase its production volume of oil & natural gas
(INR Mn) in both onshore and offshore going forward. We feel that
Particulars Actual Estimates Government of India’s indication towards 38.8% upstream sharing
of the subsidy burden is an aberration to the historical trend and will
Total Income 161,079 188,656
be rolled back to the earlier 33%. This will help the company directly
EBIDTA 79,723 130,350
by higher crude price realisation.
Reported PAT 27,909 67,950
* Source: Bloomberg, Unicon Research
At CMP INR 282, the company is trading at PE of 9x & 8.8x its FY12e
& FY13e earnings respectively. Considering the continuous demand
for crude oil and business expansion through new discoveries
domestically, as well as internationally, we remain bullish on the
stock with a price target of INR 360.

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@unicon.in
Standalone Financials (INR Mn)
DESCRIPTION Q4FY11 Q4FY10 YoY FY11 FY10 YoY
Net Sales 153,962 147,133 4.6% 658,418 599,876 9.8%
Other operating income 7,117 12,891 -44.8% 33,355 19,949 67.2%
Total Operating Income 161,079 160,023 0.7% 691,773 619,825 11.6%
Total Expenditure 81,357 65,843 23.6% 281,584 244,912 15.0%
EBITDA 79,723 94,180 -15.4% 410,189 374,914 9.4%
EBITDA (%) 49.5% 58.9% -936bps 59.3% 60.5% -119bps
Depreciation 47,877 44,480 7.6% 159,430 146,588 8.8%
EBIT 31,846 49,700 -35.9% 250,759 228,326 9.8%
Other Income 5,856 4,691 24.8% 25,682 22,199 15.7%
Interest 160 561 -71.5% 251 687 -63.4%
EBT 37,542 53,831 -30.3% 276,190 249,838 10.5%
Tax 9,633 16,066 -40.0% 86,950 82,163 5.8%
Profit After Tax 27,909 37,764 -26.1% 189,240 167,676 12.9%
Net Profit (%) 16.7% 22.9% -621bps 26.4% 26.1% 26bps
EPS 3.3 17.7 -81.5% 22.1 78.4 -71.8%
Source: Company, Unicon Research

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@unicon.in
 Unicon Investment Ranking Methodology

Rating Buy Accumulate Hold Reduce Sell

Return Range >= 20% 10% to 20% -10% to 10% -10% to -20% <= -20%

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Email: wealthresearch@unicon.in